Childcare business owners often need clarification regarding the difference between Succession Planning and Exit Planning. And which one should they be doing? To add to the confusion, succession, and exit planning are often used interchangeably. But they technically mean different things.
Succession Planning focuses on planning and preparing to hand the business over to a family member or key employee. The primary goal of succession planning is to prepare or “groom” the family member or key employee over time – often years – to take over owning and operating the business. The key to a successful succession plan and the business transition is preparing the successor over time to develop the knowledge, experience, and skills necessary to step into the business ownership role.
Exit Planning involves preparing the business to be transferred to a third party – not a family member or key employee. Most businesses, including childcare businesses, are not transitioned to a family member or key employee but to an outside third-party buyer. Therefore, the business Exit Plan focuses on improving business operations, financial performance, and business value instead of developing a successor. A strategic Exit Plan is designed to prepare the business for sale for an optimal price and terms And prepare the owner for the next chapter of their lives after their childcare business.